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The Section 125 Plan allows employees to pay for health insurance and other eligible benefits with pre-tax dollars. Essentially, the employer offers employees the opportunity to agree to a salary deduction in exchange for the benefits. This reduces the employee's taxable income, in effect making the health insurance and other eligible benefits tax free. Employers save, too, by reducing the overall payroll base on which FICA and other payroll taxes are calculated. Just be sure to meet the Section 125 plan document requirement so that your company's tax-free benefits plan is IRS-, DOL-, and ACA-compliant. Section 125 Plan Document Requirement IRS Code, Section 125 (d) (1), sets the Section 125 plan document requirement for employers offering the option of paying for health insurance and other benefits with a pre-tax salary deduction. Here is some basic information about the plan document: A Section 125 plan document contains all information on the plan, including

The IRS requires employers to report QSEHRA benefits available to employees on Form W-2 . This amount must be reported on every employee's IRS Form W-2 whether or not the employee receives reimbursement from the QSEHRA; reporting will not have an effect on the employee's taxable income either way. How to report QSEHRA benefits on Form W-2 The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a fairly new HRA plan design, available to employers since December 2016. With a QSEHRA, employers with fewer than 50 full-time employees can provide funds to help employees buy individual health insurance with pre-tax dollars, as long as the employer provides no group health plan to any active employee group. Recent guidance ( Notice 2017-67 ) provides details on the basics for reporting QSEHRA benefits on Form W-2, plus how to report variances that can come up in some employee-employer situations. Standard Permitted Benefits in QSEHRA The entire amount of th